Dollar Tree's Land Grab in Canada (DLTR, NDN, FDO)

Dollar Tree Inc. (NASDAQ: DLTR) and related peers find themselves in a far different class of dollar stores than 99 Cents Only Stores (NYSE: NDN).  Dollar Tree announced this morning that it was heading to Canada via an acquisition of Dollar Giant Store in Vancouver.  99 Cents Only took a bath last week on poor guidance and shares are now about 20% from highs, while Dollar Tree is now hitting new 52-week highs.

The Dollar Tree acquisition is fairly small at about $52 million versus its own $6.35 billion market cap.  While a small deal, this is a strategic move and the move will get Dollar Tree a footprint of 85 stores throughout western Canada and Ontario.  This appears to be the first acquisition by a US-based dollar store in Canada.

The two have very similar models, and the company is getting these on the cheap.  As of January 30, 2010, Dollar Tree operated 3,806 discount variety retail stores, so a $6.35 billion market cap yields an implied value of about $1.67 million per store.  $52 million for 85 stores in Canada yields about $611,000 per store.

Family Dollar Stores Inc. (NYSE: FDO) rose solidly back on September 29 after a 23% earning gain allowed it to easily beat earnings estimates.  At $46.10, its stock hit a new 52-week high of $46.29 today.

As far as how 99 Cents Only is doing, at $15.31, its 52-week range is $11.21 to $19.07.  Maybe they should just raise their prices to $1.00 and change to $1 Only in name.

Dollar Tree shares are up nearly 25 at $50.02 today and the 52-week trading range is now $29.80 to $50.16.  Again, that new 52-week high was today.  Let’s just hope they don’t call the company “Loonie Tree” in its new market.


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